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Brisbane Broncos lose litigation but salvage a draw in golden point extra time

The NRL premiership season is well and truly over for 2016. But, last week, a long-running litigation involving the Brisbane Broncos finally yielded a result.

The Broncos had entered into a Call Option Deed with Principal Properties Pty Ltd (Principal Properties), which provided for Principal Properties to prepare and lodge a Development Permit Application with respect to certain land owned by the Broncos. If a Development Permit was subsequently obtained, then Principal Properties was entitled to acquire the land and develop it as residential units for accommodation, a conference facility, as well as car parking to be transferred or leased back to the Broncos after completion.

As owner of the land in question, the Broncos were required to consent to the Development Permit Application so that it could be lodged by Principal Properties. However, the Broncos did not do so as they alleged it was non-compliant with the Call Option Deed in various respects. These arguments turned on the proper interpretation of the terms of the Call Option Deed, and whether certain other terms could be implied into the Call Option Deed. However, Justice Jackson rejected the Broncos’ arguments and found that the Development Permit Application prepared by Principal Properties was a compliant application that the Broncos ought to have consented to.

The Broncos sought to take advantage of clause 3.4 of the Call Option Deed, which required Principal Properties, after three years, to either terminate the deed or extend the deed, if the call option had not yet been exercised by that time. Principal Properties did neither. Principal Properties argued that their performance of that term was suspended given the Broncos’ breach, but that argument was rejected. However, Justice Jackson found that, because of the Broncos’ breach of contract, the Broncos were precluded from relying on clause 3.4 despite Principal Properties’ non-compliance with it.

The Court therefore found that the Broncos were in breach of, and repudiated, the Call Option Deed, such that Principal Properties were entitled to terminate it.

The question then arose as to what damages Principal Properties was entitled to recover. Notably, Principal Properties did not claim damages on the basis of the difference between the price to be paid for the land and its value; nor did it claim damages on the basis of any wasted expenditure. Principal Properties’ claim was that it lost the opportunity to acquire the land and develop it, which was a valuable commercial opportunity, and claimed damages in the sum of $7,476,880, although this was later amended to $5,012,607.

This particular claim was very complex, and Justice Jackson’s analysis of the damages component alone occupied 38 pages of the 59 page Judgment. The complexity arose because some of the legal issues to be considered had not been dealt with in the existing case authorities. Further, Principal Properties’ proposed development of the land involved a number of risks, would have been undertaken over a long period of time, and would have had the chance of making either a profit or a loss.

The outcome of Justice Jackson’s analysis of the principles was that if Principal Properties was more likely to make a loss than a profit, then it should be concluded that their loss was not a valuable opportunity. If, on the other hand, Principal Properties was more likely to make a profit than a loss, the Court ought to consider each of the risks in proceeding with the development as part of the measure of damages.

Various risks involved with the development were identified and considered, including:

Principal Properties might not have obtained a Development Permit that met the requirements of the Call Option Deed.

Principal Properties might not have been able to pay the purchase price of the land.

Principal Properties might not have been able to obtain development finance for the project to proceed.

Principal Properties might not have been able to obtain enough pre-sales to satisfy the likely conditions as to pre-sales of any development finance.

Principal Properties’ expenses might have exceeded those budgeted for in the feasibility.

The sales of the project products and revenue from those sales would not be enough to meet the budgeted and any other costs.

Justice Jackson considered each of these risks in detail, and the parties called evidence from various experts as to a range of issues that related to them.

But, Justice Jackson was of the view that Principal Properties was more likely to have made a loss than a profit from the development, such that Principal Properties did not suffer a loss of a valuable commercial opportunity. Due to the Broncos’ strong defence and a last minute field goal, only nominal damages of $100 were awarded to Principal Properties.

But will the video referee (the Court of Appeal) be called in to check the result? Await notification from the scoreboard.